On the Casey Reynolds Show This (Tuesday, Jan. 15) Morning at 8:15 am

I will be on the Casey Reynolds Radio Show this morning (the first day of the legislative session) to talk about the report issued yesterday by Legislative Finance, The Fiscal Year 2014 Budget: Legislative Fiscal Analyst's Overview of the Governor's Request.

The show is available locally at KFQD - 750 AM, or on the internet here.

The report is not pretty.  The report reveals that the current fiscal year (FY2013) is shaping up to be a disaster.

"Despite leaving a projected FY13 general fund surplus of $490 million at the close of the 2012 session, the legislature now faces a FY13 deficit of $410 million. ... During FY13, oil production has been below FY12 levels by more than 8%. (For purposes of comparison, the year-to-year reductions in FY10, FY11 and FY12 were 7.2%, 6.4% and 4.1%, respectively.) Reduced production accounts for about $490 million in “lost” revenue, which erased the surplus legislators thought they had left for use during the FY14 budget cycle.

Contrary to years in which higher-than-projected prices offset lagging production, FY13 prices are running $2.85 per barrel lower than the $110.45 that was projected. The result is another $410 million in “lost” revenue. There will be no debating “spend versus save” during deliberation of the FY13 supplemental budget; there is likely to be a withdrawal from savings to fill the FY13 budget gap."

The prognosis for this coming year is not much better.  Counting the $500 million the Governor has proposed be made available for "legislative priorities," (i.e., Alaska's version of earmarks), the Governor's proposed budget is the second largest in Alaska's history.

The report reveals the proposed budget is built on the same house of cards that underpinned the now-discredited FY2013 budget.  Despite the stunning fall in production this past year, the Governor's proposed budget predicts that oil production will decline only by 2.7% from FY2013, and that oil prices will be about $1 per barrel more than in FY2013 ($108.67 in FY2013 and $109.61 in FY2014).

In comments yesterday following the release of the Legislative Finance report, the Director of the Governor's Office of Management and Budget, Karen Rehfeld, claimed that the Governor was submitting a "very, very lean budget" as a starting point for lawmakers.

Its not.  Instead, the proposed budget continues to lead down the path of what Legislative Finance said in the report "could produce multi-billion dollar deficits in the near future."

More coming this morning during my discussion with Casey ...

Read more here: http://www.adn.com/2013/01/14/2752404/report-offers-sobering-assessment.html#storylink=cpy